2026 (1) TMI 1488 - HC - GST

Consolidation of tax periods in show-cause notices ruled impermissible, State High Court precedent binds and separate notices may be reissued.

Consolidation of multiple financial years or tax periods into a single show-cause notice was held impermissible, the legal basis being appellate ... Consolidation of various financial years/tax periods - show cause notice u/s 74 of the CGST Act - tax period - Jurisdiction to issue SCN - time limit for issuance of assessment order - binding effect of subsequent High Court decisions within the State - HELD THAT:- True it is that the judgment of the Delhi High Court in M/s Mathur Polymers Vs. Union of India & Ors. [2025 (9) TMI 112 - DELHI HIGH COURT] has attained finality, however, concept of merger of judgment will not apply here because the Hon’ble Supreme Court [2025 (11) TMI 1184 - SC ORDER] has dismissed the petition in limine and not on merit. There is another reason why we find that the judgments of the High Court of Bombay will prevail. In the case of M/s. Milroc Good Earth Developers Vs. Union of India & Ors. [2025 (10) TMI 867 - BOMBAY HIGH COURT] and Rite Water Solutions (India) Ltd. [2025 (11) TMI 1939 - BOMBAY HIGH COURT] following amongst others were the reasons why the Court held that show cause notice consolidating various financial years/tax periods is not permissible. These niceties, in our view, were not considered by the Delhi High Court. In the present case, since this Court has, subsequent to decision of the Delhi High Court, taken a different view, the authorities below will be bound by the subsequent judgments. The Hon’ble Supreme Court has neither stayed nor overruled the view taken in above two cases. The argument of Counsel for respondent no. 1, therefore, cannot be accepted. The Counsel for respondent no. 1 submits that to the best of her knowledge, a proposal to challenge the judgments in Milroc Good Earth Developers and Rite Water Solutions (India) Ltd., is under consideration. Thus, it is suggested that judgments in both cases are likely to be challenged before the Hon’ble Supreme Court. If that be so, the purpose will be served if the respondents are given opportunity to revive the petition, if the judgments passed by the High Court of Bombay in aforesaid two cases, are set aside. The respondents, however, are at liberty to reissue notice strictly in terms of the provisions of Section 74 of the CGST Act, if there is no other legal impediment. The petition is disposed of in above terms. Issues: (i) Whether a show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 can validly consolidate and cover multiple financial years/tax periods in a single notice.Analysis: The Court examined the statutory scheme governing assessment and recovery under the CGST Act, including the concept of a defined tax period based on returns (monthly or annual), the separate five-year limitation period for each financial year provided by Sections 73(10) and 74(10), and the statutory treatment of annual returns as fixing liability for a specific financial year. The Court considered prior Division Bench decisions which held that aggregating multiple financial years in a single SCN collapses distinct tax periods that have different due dates and limitation runs, thereby undermining the year-wise structure of the statute and the taxpayer's ability to respond year by year. The Court distinguished contrary authority by noting that the contrary view did not consider these statutory niceties and that a summary dismissal by the Supreme Court of a challenge to that contrary view did not amount to a decision on merits that would bind this Court.Conclusion: The Court concluded that issuance of a consolidated show cause notice under Section 74 covering multiple financial years/tax periods is not permissible; accordingly, the impugned order and consolidated notices were quashed and set aside, with liberty to reissue notices strictly in terms of Section 74 if not barred by any other law.